Should I adjust my investment portfolio?

If you have invested your money in US stocks, or want to do so, you may have to know this: Morgan Stanley said the US stock market may fall 10% to 15% by the end of this year. 📉

Oh 😲, why did they say so?

Stocks have had an impressive year so far – the S&P 500 has gained about 21% year-to-date, well above its historical average of 10%. It officially doubled its level from its pandemic closing low (Mar. 2020) late last month – that’s a 100% gain! 🤑 

It’s vulnerable! Many credited unprecedented stimulus for this rally. But this also makes stocks pricey. Morgan Stanley believes the markets are priced for perfection and vulnerable as….

  • Despite the surging Delta infections, dropped consumer confidence, and the incoming Fed’s tapering, US stocks are still on an upside trend. 
  • So if any bad surprises strike, the buffer left is very small. 

What do other banks think? Do they agree?

#1 Yes 🙋‍♂️

Goldman Sachs and Citi also released similar warnings, citing risks of high valuation. ⚠️

  • Big threats: the spread of the Delta variant, a flagging global growth recovery, or moves by central banks to exit pandemic-era stimulus programs.

Credit Suisse also said it maintains a small underweight on US equities due to extreme valuations and regulatory risk.

#2 No 🙅‍♀️ more gains ahead 

As of late August, other banks like Wells Fargo and UBS said they took upbeat views of the US stocks’ outlook as corporate profits are exploding. 

  • Wells Fargo thinks the S&P 500 can gain another 8% this year. 

What can we do to protect our wealth and investment?

Balance our investment portfolios. Morgan Stanley’s report recommended the below potential winners: 👍

  • Stocks in the financial sector, consumer services, consumer staples and health care. 

🐿️ Squirrytips: “Successful investing is about managing risk, not avoiding it” – Benjamin Graham (known as the “father of value investing”). 

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